Half-yearly Report
CEPS PLC (THE "GROUP" OR THE "COMPANY")
HALF-YEARLY UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
HIGHLIGHTS
* Group revenue up 13% to £8.1m
* Operating profit up 14.6% to £611,000
* EPS up 11% to 4.15p
* Cash generated from operating activities of £676,000
* Gearing reduced to 35%
* Capital and reserves increased to £4,551,000
CHAIRMAN'S STATEMENT
Review of the period
I am pleased to report a robust performance from the Group in a first half year
during which all of our businesses have performed satisfactorily in
increasingly difficult trading conditions.
Revenue from our businesses involved in the sale of goods, Davies Odell and
Friedman's, increased by 11.4% to £4.4m (2007: £3.9m) and their segmental
result before depreciation was £365,000 (2007: £404,000). Revenue from
rendering of services, the Sunline business, was £3.8m (2007 from February: £
3.2m) and the segmental result before depreciation £538,000 (2007 from
February: £458,000).
Overall Group revenue increased by 13% to £8.1m (2007: £7.2m) and operating
profit increased by 14.6% to £611,000 (2007: £533,000). After finance costs and
provision for taxation the profit for the period was £400,000 (2007: £331,000).
Earnings per share, basic and diluted, for the half year were up almost 11% at
4.15p (2007: 3.74p).
Financial review
Cash generated from operating activities in the period was £676,000 (2007: £
650,000) of which £422,000 (2007: £303,000) was used to repay bank loans and
the capital element of hire purchase agreements. After finance costs and
capital expenditure the net increase in cash for the period was £108,000 (2007,
a period that included a major fund raising and the acquisition of Sunline: £
581,000). Cash and cash equivalents at the period end were £484,000 (2007: £
463,000).
Bank loans at 30 June 2008 were lower than a year earlier by £706,000 at £
1,910,000 (2007: £2,616,000). Of these loans £1,890,000 (2007: £2,496,000) were
secured against the assets of subsidiary companies and with no recourse to the
rest of the Group.
Gearing has been reduced to 35% (from 51% at 31 December 2007) and total
capital and reserves attributable to equity shareholders of the company rose to
£4,551,000 (2007: £3,788,000).
Operational review
1. Sale of Goods
Comprising Davies Odell and Friedman's, this division has achieved an 11.4%
increase in revenue when compared to the same period of last year but has
experienced a similar reduction in profitability.
Friedman's has increased its market share but has been adversely affected by
the weakness of sterling against the euro.
The first half at Davies Odell has been encouraging with both revenue and
profits ahead of 2007. Revenue from the Forcefield body armour range and from
protection products for the equestrian industry continues to grow. The matting
business has experienced a significant increase in revenue and the footwear
components business remains a consistent performer and significant contributor
to profitability.
2. Rendering of Services
This division, which comprises Sunline's Polywrapping and Lettershop
businesses, has had an encouraging first half year with revenue of £3.8m and
segmental profit of £538,000.
The Polywrapping business has concentrated on both efficiency and product mix
and consequently has improved margins. The Lettershop business has continued to
grow revenue, although margins were a little lower. Both businesses exceeded
their profit expectations for the period.
Dividend
With the effect of the `credit crunch' on consumer behaviour and on the Group
remaining unpredictable, the Board has again decided that it is prudent to
conserve cash. As a result, the payment of a dividend is not recommended at
this stage although the Board remains keen to do so as soon as conditions
become favourable.
Prospects
Against a gloomy financial background, the second half of the year has begun
positively for the Group and trading has so far been better than expected.
Encouraged by a continuing strong trading performance, Sunline has invested in
a new polywrapping line that will enable the business to further increase its
efficiency and broaden the range of services that it can provide.
Davies Odell has begun the second half strongly with revenue growth in the same
sectors as in the first half. Friedman's, on the other hand, continues to
suffer from the exchange rate difficulties that accompany the necessity to
purchase much of its raw materials in euros and sell most of its output in
sterling.
The board continues to review investment opportunities but valuations do not as
yet adequately reflect the current uncertain economic outlook.
At this moment the Board is pleased with the start made by the Group to the
second half of the year but remains cautious about the effect on our businesses
of declining consumer spending.
The overall prospects for 2008 are therefore difficult to predict, but the
Board remains confident in the strength of its management teams and of their
ability to outperform their immediate competition and to maximise profitability
and return on capital employed.
Richard Organ
Chairman
22 September 2008
CEPS PLC
Consolidated Income Statement
Six months ended 30 June 2008
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Revenue 8,140 7,188 15,394
Cost of sales (6,861) (6,049) (13,102)
Gross profit 1,279 1,139 2,292
Net operating expenses (668) (606) (1,347)
Operating profit 611 533 945
Analysis of operating profit
- Trading 785 738 1,324
- Abortive acquisition costs - (71) (71)
- Group costs (174) (134) (308)
Finance costs (125) (125) (271)
Profit before tax 486 408 674
Taxation (86) (77) (88)
Profit for the period 400 331 586
Attributable to:
Equity holders of the Company 345 270 491
Minority interest 55 61 95
400 331 586
Earnings per share
- basic and diluted 4.15p 3.74p 6.32p
Consolidated Statement of Recognised Income &
Expense
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Fair value gains, net of tax
Actuarial gain on retirement - - 196
benefit
obligations
Net income recognised directly in - - 196
equity
Profit for the period 400 331 586
Total recognised income for the 400 331 782
period
Attributable to:
Equity holders of the Company 345 270 687
Minority interest 55 61 95
400 331 782
CEPS PLC
Consolidated Balance Sheet
As at 30 June 2008
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 1,145 1,180 1,239
Intangible assets 4,748 5,330 4,751
Deferred tax asset 45 144 45
5,938 6,654 6,035
Current assets
Inventory 1,481 1,459 1,391
Trade and other receivables 2,913 3,095 3,151
Deferred tax asset 73 45 73
Cash and cash equivalents 555 463 383
5,022 5,062 4,998
Total assets 10,960 11,716 11,033
Equity
Capital and reserves attributable to
equity holders of the Company
Called up share capital 416 416 416
Share premium 2,756 2,755 2,756
Profit and loss account 1,379 617 1,034
4,551 3,788 4,206
Minority interest in equity 214 219 159
Total equity 4,765 4,007 4,365
Liabilities
Non-current liabilities
Borrowings 1,659 2,393 2,138
Trade and other payables - 500 -
Retirement benefit liabilities 126 470 162
Provisions 55 32 55
1,840 3,395 2,355
Current liabilities
Borrowings 1,739 1,434 1,490
Trade and other payables 2,485 2,532 2,778
Current tax liabilities 131 348 45
4,355 4,314 4,313
Total liabilities 6,195 7,709 6,668
Total equity and liabilities 10,960 11,716 11,033
CEPS PLC
Consolidated Cash Flow Statement
Six months ended 30 June 2008
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2008 2007 2007
£'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations 676 650 1,466
Tax paid - - (237)
Interest paid (125) (125) (254)
Net cash generated from operations 551 525 975
Cash flow from investing activities
Purchase of property, plant and (21) (11) (67)
equipment
Purchase of computer software and - (7) (49)
website development
Purchase of subsidiary undertakings - (3,940) (3,940)
net of cash acquired
Payment of deferred consideration - - (30)
Net cash used in investing activities (21) (3,958) (4,086)
Cash flow from financing activities
Proceeds from issue of Ordinary share - 2,317 2,318
capital
Proceeds from new bank loans - 2,000 2,000
Repayment of bank loans (347) (245) (604)
Repayment of capital element of hire (75) (58) (109)
purchase agreements
Net cash (used in)/ generated from (422) 4,014 3,605
financing activities
Net increase in cash and cash 108 581 494
equivalents
Cash and cash equivalents at the 376 (118) (118)
beginning of the period
Cash and cash equivalents at the end of 484 463 376
the period
Cash flows from operating activities
The reconciliation of operating profit
to cash flows from operating activities
is as follows:
Operating profit for the period 611 533 945
Adjustments for:
Depreciation charge 118 124 264
Difference between pension charge and (36) (36) (76)
cash contribution
Operating profit before changes in 693 621 1,133
working capital and provisions
Movement in provisions - - (27)
Increase in inventory (90) (71) (3)
Decrease in trade and other receivables 238 220 164
(Decrease)/increase in trade and other (165) (120) 199
payables
Cash generated from operations 676 650 1,466
Cash and cash equivalents
Cash at bank and in hand 555 463 383
Bank overdrafts repayable on demand (71) - (7)
484 463 376
General information
This condensed consolidated half-yearly financial information does not comprise
statutory accounts within the meaning of section 240 of the Companies Act 1985
(section 434 of the Companies Act 2006). Statutory accounts for the year ended
31 December 2007 were approved by the Board of directors on 20 May 2008 and
delivered to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 237 of the Companies Act 1985
(section 498 of the Companies Act 2006).
This condensed consolidated half-yearly financial information has not been
reviewed or audited.
Basis of preparation
This condensed consolidated half-yearly financial information for the six
months ended 30
June 2008 has been prepared under the historical cost convention and in
accordance with the AIM Rules for Companies and the International Financial
Reporting Standards ("IFRS") as adopted by the European Union.
Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the annual financial statements for the year ended 31 December 2007,
as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year beginning 1 January 2008,
but are not currently relevant for the group.
* IFRIC 11, `IFRS 2 - Group and treasury share transactions'.
* IFRIC 12, `Service concession arrangements'.
* IFRIC 14, `IAS 19 - the limit on a defined benefit asset, minimum funding
requirements and their interaction'.
Notes to the financial information
1. Segmental analysis
All activities are classed as continuing.
a) Primary reporting format - Business segments
The group is managed in two principal business segments.
i) Results by segment
Unaudited 6 months to 30 June
Sale of goods Rendering of Group
services
2008 2007 2008 2007 2008 2007
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 4,380 3,933 3,760 3,255 8,140 7,188
Segmental result 365 404 538 458 903 862
Depreciation charge (40) (56) (78) (68) (118) (124)
Abortive - (71)
acquisition costs
Group costs (174) (134)
Interest expenses (125) (125)
Profit before 486 408
taxation
Taxation (86) (77)
Profit for the 400 331
period
ii) Assets and liabilities by segment
Unaudited as at 30 June
Segment assets Segment liabilities Segment net assets
2008 2007 2008 2007 2008 2007
£'000 £'000 £'000 £'000 £'000 £'000
CEPS Group 133 225 (72) (29) 61 196
Sale of goods 5,068 4,867 (3,090) (3,433) 1,978 1,434
Rendering of 5,759 6,624 (3,033) (4,247) 2,726 2,377
services
Total - Group 10,960 11,716 (6,195) (7,709) 4,765 4,007
b) Secondary reporting format - Geographical segments
The United Kingdom is the main country of operation from which the Group
derives its revenue and operating profit and is the principal location of the
assets of the Group. The Group information provided above therefore also
represents the geographical segmental analysis.
2. Earnings per share
Basic earnings per share is calculated on the profit after taxation for the
period attributable to equity holders of the Company of £345,000 (2007, £
270,000) and on 8,314,233 (2007, 7,211,618) ordinary shares, being the weighted
number in issue during the period.
Diluted earnings per share is calculated on the weighted number of ordinary
shares in issue adjusted to reflect the potential effect of the exercise of
share warrants. No adjustment is required in either period because the fair
value of warrants was below the exercise price.
3. AIM Compliance Committee
In accordance with AIM Rule 31 the Company is required to have in place
sufficient procedures, resources and controls to enable its compliance with the
AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its
compliance with the AIM Rules whenever appropriate and take that advice into
account; provide the Company's Nomad with any information it requests in order
for the Nomad to carry out its responsibilities under the AIM Rules for
Companies and the AIM Rules for Nominated Advisers; ensure that each of the
Company's directors accepts full responsibility, collectively and individually,
for compliance with the AIM Rules; and ensure that each director discloses
without delay all information which the Company needs in order to comply with
AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that
information is known to the director or could with reasonable diligence be
ascertained by the director.
In order to ensure that these obligations are being discharged, the Board has
established a committee of the Board (the "AIM Committee"), chaired by Richard
Organ, a non-executive director of the Company.
Having reviewed relevant Board papers, and met with the Company's Executive
Board and the Nomad to ensure that such is the case, the AIM Committee is
satisfied that the Company's obligations under AIM Rule 31 have been satisfied
during the period under review.
4. Distribution of the Half-Yearly Report
Copies of the Half-Yearly Report will be available to the public from the Group
website, www.cepsplc.com, and from the Company Secretary at the Company's
registered address at 11 George Street, Bath BA1 2EH.
This year a printed copy of the Half-Yearly Report will be mailed to all
shareholders. In future years it will be mailed only to shareholders who
specifically request this.
Contact:-
Peter Cook, Group Managing Director
CEPS PLC
Tel: 07788 752560
David Newton, Nominated Adviser
Dowgate Capital Advisers Limited
Tel: 020 7492 4777
Friday, 10th January 2025
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